Today the Calls and Puts at Money were trading at Discounted values to fair valuation but premiums in absolute terms has not changed much due to volatility sustaining at higher levels.
If at the money options are trading, at lower valuations, it means that the market is not going anywhere as of now, I think these guys are playing with volatility, ahead of news ,once the events are out then market will show its mood. So far all negatives have been ignored by the markets.
Immediate volatile reversal to the levels of 6200/6100 is not expected mainly due to two reasons –
1) China’s underperformance is favorable for India. There was a time when China was first preference for FIIs over India. India was definitely after china. Now looking at current scenario India has got a preference over China and other emerging markets as well. This time India will outperform china and this is the big reason why money is flowing into India.
2) Secondly, Due to elections is on cards next month and as per estimates from election commission government has to spend more than 3000 crores for conducting elections – this does not include the amount spent by political parties and candidates (legal and illegal). This the bare conducting cost spent by government. And political parties and candidates spends more than 10 times of this figure which is close to 30000 crores and this is rough estimate on lower side.
And most of us think that FIIs are the pure investors coming to India for dividends, Interest and capital gains only. But this is not true. Their true Business is money laundering across the globe. Otherwise if they have invested more than 70000 crores during preceding year has not resulted in significant rallies, and just by investing 7000-8000 crores we are witnessing extraordinary rallies and that too without fundamental support. Basic inflows coming into India during these days belongs to Politicians and corporate houses who funds the politics. This money flowing into debt and equities in India is temporary parked for one to one and half month. As we come closer to elections we will see money flowing out. And the people who have bought in these rally will be stuck.
The biggest cause of concern for China is its credit to GDP ratio, means it has funded its economy by providing massive loans ( bearing interest). But I think China is better that US economy, what US has done in the form of quatitative easing program is the same thing that China has done. At least china has some cushion in the form of Interest chargeability, but US doesn’t have that luxury. Printing more and more monies is not the solution for fighting tough situations otherwise every country will start printing more and more money and will become prosperous and none of the citizen of all the rich nations has to work. Simply their goverments are printing monies for them and they will get their food and livelihood.
What US and china has done and to certain extent Japan, is extremely dangerous for currency systems across the globe and if currency systems are damaged then we will again go back into barter system.